‘No escape from GST even if you switch from UPI to cash’: Karnataka tax body warns Bengaluru’s petty street vendors

The Karnataka Commercial Taxes Department (CTD), the government body based in Bengaluru responsible for Goods and Services Tax (GST) regulation in the state, warned vendors in the city that opting out of UPI would not save them from getting slapped with tax notices.

This came after street vendors and small-scale traders who run bakeries, etc., were slapped with GST notices by the CTD for transactions in FY2021-2022. This led to public outcry, with vendors calling for a strike on July 25. Ground reports indicate the suspension of milk sales on July 23, a boycott on cigarettes and gutka on July 24, and a full closure of bakeries, petty shops, and condiment stores on July 25.

Multiple advocacy groups have already slammed the GST authorities for triggering the backlash, calling it a government failure in outreach and education. They (the GST body) resorted to fear—rather than compliance, they said.

The latest CTD notice does not help matters. All it has done is increase the fear of legal action, possible evictions, and seizures in the petty store vendors. Many street vendors in places like KR Market and Shivaji Nagar have already shunned UPI, putting up “no UPI, only cash” boards.

CTD officials still stand by the notices, stating that they only sent notices to those exceeding the GST threshold of  ₹40 lakh a year, leaving them with these options: register under GST, submit clarifications, or join the Composition Scheme.

While Bengaluru’s petty traders look for clarity and compassion, the Karnataka GST notice read, “It has come to the knowledge of the department that certain traders have stopped receiving payment through UPI and are receiving consideration in the form of cash subsequent to the issue of notice. The GST is applicable on the consideration received for the supplies in any form, and UPI is only a method of receiving such consideration.”

“The department will take suitable action to collect the applicable tax under the GST Act from the traders who have received consideration in any form,” threatened the taxation body.

Of course, from a legal perspective, the GST body is right. According to section 22 of the Goods and Services Tax Act 2017, “every person who carries on a business activity and receives payment by way of cash, UPI, POS Machine, Bank Payments or by any other means exceeding ₹40 lakh annually in case of a person dealing only in goods and exceeding ₹20 lakh annually in case of persons dealing in services have to obtain GST registration mandatorily.”

Moreover, according to the CTD, “any person whose annual turnover is less than ₹1.5 crore can opt for the composition tax scheme after obtaining GST registration and can pay SGST at 0.5 per cent and CGST at 0.5 per cent. But, the composition tax scheme is not applicable to the turnover made without obtaining registration.”

But the only issue is that most of the petty vendors in Bengaluru (and in most parts of India) are from the disorganised sector. Yes, payment-wise, the government has brought them into the organised economy, but they simply failed to educate them. Instead of compliance, the GST body has invoked fear and anger. And the retaliation is the partial lockdown now planned for the coming week.

“The traders are advised, not to get confused and to submit explanation with relevant documents after visiting the office from where they have received notice and the officers would verify them and suitably inform the relevant provisions of the GST and also their remedies and would levy tax at the applicable rates only on the taxable turnovers after excluding the tax exempted goods and services,” the Karnataka CTD stated, almost as if they expect the petty street vendor who sells chai and an evening bite for a living to show up and provide explanations on why GST was not paid.

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